The standard deviation of a stock's annual returns is 35.0%. The standard deviation of market returns...

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Answer 1

Answer #1

Stock's Standard Deviation = SD1 = 35% and Market's Standard Deviation = SD2 = 26%, Correlation Coefficient = 0.2 = p

Covariance of Stock and Market = Cov = SD1 x SD2 x p = 35 x 26 x 0.2 = 182

Stock Beta = Cov / (SD2)^(2) = 182 / (26)^(2) = 0.26923 ~ 0.27

Answer 2

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